870173 TMRS CAFR new8 fix 049-081.qxd - Texas Municipal ...

OUTLINE OF INVESTMENT POLICIES
Because the plan design depends on a relatively consistent level of credited interest across all plan years, and
because compound interest credited annually at the highest feasible rate best assures the highest amount of
accumulated deposits of the member at retirement, TMRS’ goals are best achieved by an income-producing portfolio
management strategy, rather than a total return strategy that may result in credits below the 5% statutory
minimum target level.
As such, neither market value declines nor rises of its fixed-income portfolio is of material significance to
the System’s investment objectives. Periods of rising interest rates, which, by definition, will result in erosion of
bond market values, should be regarded as opportunities to increase the yield on the total portfolio, and fixed
income market volatility should be regarded as an opportunity to realize gains.
INVESTMENT OBJECTIVES
The basic objectives of investment and reinvestment of system assets are:
1. To assure preservation of (and return of) principal.
2. To earn income sufficient to:
a) Allow annual interest credit on the reserve funds at the minimum statutory rate;
b) Pay annual administrative costs of the System; and
c) Allow annual interest credit on the member and municipality accumulation accounts at the
minimum statutory rate.
3. To consistently earn additional income, if feasible, for the following purposes:
a) Maintain and continue an “interest reserve” to better ensure continued credits at the statutory minimum
target rate during low yielding market periods;
b) Pay a distributive benefit to annuitants on December 31st of each year; and
c) Credit additional annual interest to the individual accounts of members and to the accumulation
accounts of municipalities.
GENERAL INVESTMENT POLICIES
1. Funds of the System shall be invested, without distinction as to source, only in securities as that term is
defined in the TMRS Act and as authorized by the TMRS Board of Trustees’ investment policies. Board policy
limits on amounts of any security or class of securities shall be observed.
2. Investments shall be made with the degree of judgment and care, under the circumstances prevailing at
the time of the investment, that persons of ordinary prudence, discretion and intelligence exercise in the management
of their own affairs, not in speculation but when making a permanent disposition of their funds, considering
the probable income from the disposition and probable safety of their capital.
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T M R S COMPREHENSIVE ANNUAL FINANCIAL REPORT 2004